Q3 2022 Option Care Health Inc Earnings Call

October 27, 2022

The conference will begin shortly.

Raise your hand during Q&A, you can dial star one one.

[music].

Good day and thank you for standing by welcome to the option care Health third quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during that session you will need to press star one one on your telephone.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to our Speaker Mike Shapiro. Please go ahead.

Mike Shapiro. Please go ahead.

Good morning. Please note that today's discussion will include certain forward looking statements that reflect our current assumptions and expectations.

Including those related to future financial performance and industry and market conditions. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release as well as in our Form 10-K filed with the SEC regarding the specific risks and uncertainty.

We do not undertake any duty to update any forward looking statements, except as required by law. During the call. We will use non-GAAP financial measures when talking about the company's performance and financial condition. You can find additional information on these non-GAAP measures in this morning's press release posted on the Investor relations portion of our.

Our website with that I'll turn the call over to John Rademacher, Chief Executive Officer.

Thanks, Mike and good morning, everyone.

<unk> third quarter results reflect our continued strong execution in a very challenging operating environment.

Overall, we are quite pleased with the progress we made in the third quarter, while delivering solid growth in revenue and earnings.

Growing EBITDA earnings by nearly 10% year over year during a period of significant disruption demonstrates the strength of our team and the resilience of the platform.

The team responded to dynamic market conditions, including repositioning by some market participants are significant natural disaster and escalating inflationary pressure to help ensure we are providing real solutions to our referral partners and setting the standard for patient care across the industry.

In the third quarter revenue growth of more than 14% as a result of mid single digit growth in key acute therapies and mid teens growth in the chronic portfolio.

We continue to focus on streamlining the onboarding process with referral sources and we have made progress on our cost across a number of key therapeutic area.

Our collaborations with health systems across the country enable us to accelerate growth in the quarter for key acute therapies, given favorable market dynamics and the Oxiclean helped team responded to acute opportunities in specific markets to ensure our referral sources could rely on us for efficient transitions of care.

Sure.

Although this cost screens on our operations at a market level in the near term, we believe the strength and resilience of our technology enabled national network with a significant path.

Our ability to dynamically shift workloads to utilize our capacity and respond to the needs of our hospital partners in the local markets helped to reaffirm our position as <unk> of choice.

Yeah.

I would also like to recognize the incredible work of our team in Florida, and our cross our enterprise as they supported our patients and referral sources in the path of hurricane in.

The devastation of the storm brought to the southwest, Florida and across the state was unimaginable and heart wrenching and our team rose to the challenge to help ensure all of our patients were prepared and had access to their medicines and supplies throughout the emergency.

We continue to work in partnership with our referral sources and patients and the communities most affected to help with the recovery effort through our facility in Fort Myers and across the state.

As always Mike will impact the financial results in a few minutes, but we continue to pace inflationary pressure across a variety of categories, including clinical labor transportation medical supplies and several key business services.

We do not see cost pressure subsiding in the near term and in fact, we have seen heightened pressure in several areas.

As always we continue to relentlessly focus on operational efficiencies.

To offset the pressure.

And in some instances, we have negotiated improved reimbursement for therapies and services most impacted by the inflationary environment with Payors.

We continue to work closely with our health plan partners through our dedicated market access team to highlight these cost pressures and discussed ways. We can work together to help ensure we are being reimbursed fairly and appropriately for the value we bring to their members.

On the M&A front late in the third quarter, we acquired Rochester home infusion, a retail leader in home infusion based in Rochester, Minnesota.

As we have consistently mentioned, we will actively seek complementary infusion assets that we believe are well positioned strategically and represents sustainable financial returns.

Rochester has emerged as a rapidly growing leader in the upper Midwest with key relationships with leading health system and we are thrilled to welcome them to the option care health family.

We also continue to evaluate our portfolio of assets to ensure we are optimizing the capital base and in October we entered into an agreement to divest our respiratory therapy service line, we operated in the northeast.

This operation was part of bio script organization and it is both a capital intensive and strategically different business than our core enterprise with different call points.

We believe it is more logical that the operation resides within an organization oriented to and focused on the respiratory therapy market.

We continue to invest in our organic growth strategy our.

Our technology enablement and digital strategy took a significant step forward as we began to pilot touch point, our mobile app that improves patient engagement through self service functions and secured two way communication as well as increasing the data capture and analytics, we can provide.

This has been part of our overarching multiyear technology investment and it is great to see the fruits of our labor beginning to ramp.

This is part of a multifaceted approach, we're taking to enhance care and improved clinical outcomes through capturing the care plan digitally identifying trends through analysis and exchanging insight with the prescriber and other members of our patient care team through interoperability.

Also through Q3, we have opened 16, new ambulatory infusion centers across the country. This year and have expanded our total share count to over 570 infusion chairs across the country.

We are on track to open a total of 25, new facilities. This year and further expand our capacity to serve patients conveniently and effectively close to where they live and work.

Again, increasing utilization of our infusion centers as a key growth strategy as it enables us to more effectively treat patients and better utilize our clinical resources.

Currently approximately 23% of our nursing events occur in one of our centers and we are focused on further increasing center penetration.

Finally, as Mike will outline we are tightening our guidance heading into the fourth quarter by slightly increasing the midpoint of our expected adjusted EBITDA results for the year.

Overall 2022 is shaping up to be an extremely productive year for option care health.

Across a variety of measures and we remain focused on finishing the year strong while continuing to invest for the future.

Before turning over the call I would like to bring to your attention that we have enhanced our investor relations website to include a dedicated piece that highlights our current ESG initiatives and outlines other ESG efforts underway.

And with that I'll turn the call over to Mike to review the results in a bit more detail Mike.

John .

Revenue growth in the quarter of 14, 5% was well balanced as John mentioned as we saw solid mid single digit growth in the acute portfolio and continued mid teens growth in the chronic portfolio.

Our quarterly net revenue exceeded $1 billion for first time as the team has driven double digit revenue growth on a sustained basis.

Gross margin of 21, 4% declined 140 basis points year over year as a result of continued mix impact towards chronic therapies and unprecedented cost pressures that continue to affect our margins.

I'd previously estimated quarterly inflationary impact of $10 million to $12 million and in fact, we continue to see emerging cost pressures across a number of categories.

While that range was an estimate we are currently seeing inflationary impacts about $10 million to $12 million a quarter impacting primarily our gross margin, but also to a lesser extent in SG&A.

With respect to spending SG&A grew a little over 5% and declined as a percent of revenue to 13, 9%. Despite the inflationary pressures I just discussed.

We remain vigilant on cost management and efforts to drive additional efficiencies, which has enabled to a great extent by our investments in technology.

This has also enabled a more proactive staffing strategy given the labor market backdrop and has resulted in a more efficient labor model in many markets and functions.

Adjusted EBITDA of $85 $6 million grew nine 8% over the prior year and adjusted EBITDA margins came in at eight 4%.

Again at a high level the cost pressures, we absorbed in the quarter impacted EBITDA margins by over a full point.

Despite the near term challenges our conviction around the scalability of the platform and the ability to expand adjusted EBITDA margins over time remains intact.

As all you know our mantra is that revenue only counts if it hits the bank account and cash flow in the quarter was very strong cash flow from operations of $87 million drove an increase in our cash balances to more than a quarter $1 billion for the first time, despite investing in Rochester home infusion in the quarter.

We exited the quarter at a net debt to adjusted EBITDA ratio of two five times and our capital structure has never been stronger.

I wanted to add onto John's remarks regarding the strategic moves announced this morning, we're very excited to share the news regarding the acquisition of Rochester home infusion, which we believe is incredibly well positioned in the upper Midwest and complement our operations quite well.

As disclosed we paid $27 $4 million in the quarter at roughly a low double digit adjusted EBITDA multiple.

And while we're not disclosing specifics on the respiratory therapy divestiture, we anticipate closing on that transaction in Q4, and the ongoing adjusted EBITDA impact from those two transactions will effectively be a wash in the near term.

But I do think it's important to reiterate John's comment that we remain focused on our entire portfolio of assets to ensure we have the right invested capital for this platform.

Finally based on the third quarter result, we are tightening our expected financial results for the full year and slightly raising the midpoint of our expectations for adjusted EBITDA.

For the year, we now expect to generate revenue of $3 9 billion to $3 95 billion.

And adjusted EBITDA of 336 million to $341 million.

We continue to expect that we will generate at least a quarter billion dollars of cash flow from operations for the year.

Reflecting on our revised earning expectations I think it's worth highlighting that despite unforeseen and continued inflationary pressures. We've raised the midpoint of our guidance range by more than $18 million relative to our initial range of $310 million to $330 million entering the year.

So overall, we anticipate finishing the year strong and delivering another productive year from the option care health team.

And with that we'll open the call for Q&A, operator, certainly as a reminder to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster.

<unk>.

Our first question will come from Matt Larew of William Blair, Matt Your line is open.

Yeah, Hey, good morning, Mike.

On.

The inflation comment could you maybe get a sense for where you might see some things a bit worse than expected, maybe that's cross border.

Pockets of.

A challenge or areas are getting better and then how to maybe think about the duration of the saddle, perhaps how we should think about them as we roll into 2023.

Thanks, Matt and good morning, great to hear from you.

Yes look as we've mentioned repeatedly over the course of the last couple of quarters.

It is a.

Multifamily faceted battle on the inflationary front I think we've been candid some of the larger categories are around obviously, the clinical clinical labor cross, our nursing and pharmacy organizations.

As we've tried to articulate crude oil has a multifaceted impact on our operations.

From a shipping and logistics on therapies, leaving our compounding pharmacies as well as the thousands of miles that we're driving and reimbursing our clinical teams for on a daily basis to the medical plastics supplies that we're procuring.

So I don't think Theres any one.

One category that has disproportionately deteriorated we've seen.

Building utilities in our electrical and natural gas Theyre up double digits now versus Q4 of last year.

Well as you know a lot of broad business services, whether it's facility management.

Maintaining our fleet of more than 40000 infusion pumps et cetera. So.

I would say Theres, nothing where theres been an epiphany, it's just pardon the analogy death by 1000 cuts.

In terms of where we see this heading frankly and again, obviously, we're not in a position to provide any thoughts on on next year at this point, but as John mentioned and I wholeheartedly agree we don't see these costs subsiding anytime soon we don't see them as transitory.

And frankly, that's our rally cry internally to become more efficient to drive more productivity.

Okay got it helpful. And then the topline obviously was strong again that a little bit flexible trend.

From other.

Providers in this space, where maybe there's been lower referral volumes lower hospital volumes guidance. So.

Maybe just give us a sense.

Sure taking it maybe benefiting from competitors, leaving the market and some acute markets.

Maybe help us understand the topline shrinks a little bit better.

Yes, Matt it's Jon good morning.

Look I think overall, we feel like.

Like we're really well positioned to be that partner of choice for those health system, and especially in some of those markets, where there was disruption and a little bit of shift in the competitive dynamics.

I think as we went through the quarter, we found a better rhythm on that needless to say there is.

There were some capacity constraints as we are building up our ability to take on additional patients we all.

We try to operate pretty efficiently and effectively.

That's part of the.

The operational and business.

Acumen of our team.

Adjusting around that and using the capacity, where we could still look we saw.

No.

I would say better referral volumes in some of those markets.

I think we're able to convert that over which which added to the strength.

But as I said in my prepared remarks, it did put some strain on the system as we are adjusting to some of that that market dynamic and I think also contributed to some of the cost structure, just as we had to move things around as part of the workload.

Balancing that we can do across our network based on the technology.

So all in all pleased about it we think there is some share shift.

Was that we recognized in the third quarter and the focus of the team as always from a commercial standpoint is around reach and frequency and make certain that we have those relationships to help support our health system and our prescriber partners as they're looking for transitioning patients on to service.

I think we executed well, even though there were some strains that were caused by some of the <unk>.

Some of the workload, because they've got shifted because of market dynamics.

Alright, thank you.

Thanks, Matt Thanks, Matt.

And one moment.

Our next question will come from Lisa Gill of Jpmorgan.

One moment lethal.

Good morning.

Okay, great. Thanks, very much good morning.

I wanted to go back to John you made a comment around three areas you said repositioning the hurricane and inflationary pressures have talked about the inflationary pressures is there a way to quantify the impact from the hurricane and the quarter, whether it's revenue or operating profit.

Yes, Lisa I don't.

I don't think there is.

And.

Certainly there was disruption during the period.

I do again, just want to call out the great work of our team.

A lot of that what happens is we have to prepare in advance we have to make certain that our patient tab medicine.

And supplies that will get them through.

The emergency many of them moved away from the coast and so we really scrambled to make certain that we were well positioned in that we were able to serve our patients through that the long lasting impacts in southwest, Florida, as we've all seen and videos on the.

Yes.

It's going to have.

Some modest.

Ask around just.

The care delivery model within that area, but I would say in general.

It's too hard for us to really quantify I don't know, Mike if you've got any additional color that you'd like to add yes, John Hey, Lisa the only thing I would say is look that Ian hit later in the third quarter, but as John mentioned, we're we're maniacal about making sure we know where our patients are do they have the supplies and the therapies.

And so there was a there was some inefficiency in some spike later in September I'd say in the third and fourth week as we tried to compound ahead, we have compounding pharmacies in Fort Myers, and Tampa and we wanted to make sure that we work.

Shifting production I think that speaks to the resiliency of our model, but there was some disruption in referrals.

Costs, which were always going to put patient care above everything else.

Okay, Great and then just a quick follow up you talked about Rochester Helman Susan.

You talked about low double digit EBITDA multiple that you paid for it but can you help us maybe understand.

What types of services. This business provides is there any way to breakdown between acute and chronic.

Is there new functionality youre going to get any other incremental details that you think would be important for us to understand around that acquisition.

Yes, we're really excited about it as we've mentioned from an M&A perspective, we're going to be very thoughtful as we look at other infusion assets to make sure that strategically they fit as well as economically it's it sustained its not just.

Looking at folks that we're competing against within a metropolitan area Rochester's quite unique they have a they.

They have a very strong presence in Rochester, Minnesota as you know there is one or two notable health systems in that area, where they really focused on.

In that area as well as our casting a pretty broad shadow across the upper Midwest, Wisconsin, Minnesota, Iowa.

Binding there their health system centric relationship management, with our infrastructure technology and procurement.

We see that is.

Exceptional way for us to extend our operational footprint with what we see as a very strategically well positioned operator.

Within a admittedly relatively finite geographic area, but.

They have relationships in that area, which are highly complementary to our commercial efforts, yes. The only other thing I would add to that at least it looked when you. When you have that depth of our relationship and certainly with some of the health care providers in that marketplace.

The there is a.

Travelling aspect to that many of their patients.

And the ability for us to service with our National network as their discharge back home to their local communities.

The option care Health network.

<unk> fits really well within that service model as well the mix of business I think is in alignment with our standard book between acute and chronic but it was really the depth of the relationship.

And the presence that they had and in the market that I think was really intriguing as well is I think a really strong cultural fit putting the patient at the center of everything that they do in developing those deep relationships with the referral sources and their community.

Great. Thanks for the comments and congratulations on another solid quarter.

Thanks Lisa.

One moment.

And our next question will come from David Mcdonald of Truth. Your line is open David.

Yes, good morning, guys.

Couple of questions.

You guys mentioned, 23% of.

Of the nursing visits being through the ambulatory infusion suite can you give us a percent.

<unk>.

What is that percentage amongst new patients that are coming on and then can you also talk about.

Just the importance of that setting.

As new products come to market I mean, I'm thinking about potentially eventually something around the Alzheimer's area.

If something on the reimbursement side well worked out just how you guys think about the importance of that and how leverages all that is with payers and manufacturers with new products come to market.

Hey, good morning, Dave It's Mike I'll take the easy one and then I'll, let John answer. Your second question look we're really energized about our expanded footprint. We're opening these we opened an additional four in the quarter as John mentioned, we're on track.

Opened 25 new centers.

We talked earlier in the year about our nursing visits being around 20% to 21% in the center.

In the third quarter, we saw some traction on that front admittedly that's skewed more towards.

Our patients who are more ambulatory typically.

Typically we penetrate the chronic condition to a greater extent and as you can imagine part of it is as we engage with patients upfront ensuring that we have convenient and an esthetically pleasing facilities that are convenient to them and their lifestyles.

Key obviously, we can have those conversations more and more as we're opening more of these centers. So the short answer is we're seeing considerably more traction, especially with some of our newer chronic patients that are coming onto the service.

Especially if we can offer them an alternative that that's convenient and as we've mentioned our patient satisfaction is as high if not higher in our centers as opposed to the home. So really excited but we were seeing traction and we would expect that to continue going forward, yes, David and it's part of just the overarching.

<unk>.

To your point, we really look at this as being a platform that allows us to.

To expand our ability to serve.

<unk> pharma.

As well as patients more broadly in the marketplace and we're always looking for ways to.

Expand the product portfolio, whether it's through some of the.

Limited distribution drugs that we have access to and certainly in the conversations that we have as being a channel partner for Biopharma as theyre looking to introduce new products or.

Two.

To focus around.

Additional work and marketing on.

Existing products. So this platform really allows that as Mike said the expansion has been one in which we're going deep in markets.

That we have that convenience factor.

For many of the patients and especially those with chronic conditions that are out doing activities of daily living they're going to work there out in their.

Communities and to have a very convenient and.

An efficient place to move.

<unk> receive their care we think.

Is extremely important we also look there are some interesting new products that are on the horizon, whether it's for alzheimers or other.

Disease state and the infrastructure that we're building and the <unk>.

Facilities that where our operating will really position us well to be able to take on.

Some of that patient cohort if.

It gets approved if there is a path to payment if.

There's a lot of ifs on that on that journey, Dave, but we feel like the <unk>.

<unk> that we're making will continue to make us well positioned as a partner of choice for those biopharma manufacturers and for those prescribers, who are looking for a solution to help support their patient base. Okay. Thanks, guys. Just two other quick questions I don't know if you want to get into this level of detail, but just on the on the acute side.

Syed.

Can you give us a sense in terms of just the impact of some of the competitor move in market. So if you think about kind of a mid single digit growth. I mean was this enough that it contributed a point or two or is it more around the edges and would you expect to kind of continue to see opportunities to pick up share in some of these mark.

<unk> says potentially some competitors exit.

Yes look Dave.

I would characterize it is.

The margin benefit look I mean, we have been clear that our strategy is to focus on the breadth of both acute and chronic portfolios, we see that as a winning strategy for us going forward, but we've also been very clear that the acute business is not easy.

It's to be as responsive as our health system partners expect us to be.

Hundreds if not thousands of times a day to to turn that it takes investment and we've been very open we've been investing over over the course of several years to make sure we have that resilient and dependable platform and so.

There is no metropolitan area, where it's just us in one or two others. Every every market is additive and we feel it is a challenging environment out there from from the inflation from a labor availability perspective.

And.

We're not really tracking our performance relative to one or two others, but I think we feel really good about our dependability across the market, but again.

Every market is competitive in.

I think going forward that gives us a wind in our sails, but.

No.

I would characterize it how you did which is look at it it was a solid quarter with mid single digits and we've been open that we see this as a low single digit.

Portfolio over the over the medium term.

So really encouraged by the near term execution.

And then just one last question just on <unk>.

Touch point.

Can you talk about the potential benefit in terms of just data capture and what that.

How that may be helpful. Not only for you guys, but in terms of kind of relationships with your payers and sharing that with the players.

Yes, David look we're really excited about the progress and the fact that we've we've gotten to this point in our development plan.

And roadmap that we had laid out look we have always focused around data as an organization and when you think about what we are capturing on the patients that we have the privilege to serve.

Is really.

Really important value.

As we see it the touch point tool is just going to enable that even more and it's part of our overall digital strategy digitizing that care plan and every interaction that we have and then being able to.

Put that into structured data that we can utilize to interrogate and to identify opportunities for us to improve clinical protocols for us to make certain that we're driving superior clinical outcomes, and then be able to share it.

With partners, whether in Biopharma with V identified dataset or with the prescribers or with payers as we move that forward and so this allows.

Allows us to have a much greater.

Opportunity to collect data on a launch suitable basis. It allows us to have a much more direct and intimate relationship with the patient base. It allows us to have.

Secure two way communication between our clinicians and our patients.

That we're serving through that process. So we're really excited about it look it's early stage, but when you think about capturing social determinants of health do you think about all of the other components that we have a privileged insight given the fact that we have a depth of relationship whether in the home or one of our infusion.

Fleet, given the amount of time that we spend with the patient we are really excited about this next phase.

And the <unk>.

Potential that this platform will bring for us to enhance the already rich data set that we're collecting today.

Okay. Thanks, very much guys.

Yes.

One moment.

And our next question will come from Chiron Ryan of Deutsche Bank.

And Karen your line is carrying on for Peter.

A gallon.

Thank you Eric.

First just wanted to get your thoughts on the implied <unk> revenues.

On a sequential basis, it seems a little light versus kind of what you've done over the last couple of years as far as the step up from <unk> to <unk>.

So I was wondering if you can kind of just talk about what what would drive revenues to be flattish sequentially.

Yes, I think look we provided arrange care and that we think is reasonable and prudent obviously recognizing some of the challenges I think.

The implications of our guidance would still.

Imply a Q3 to Q4 step up which you historically see in this business again I think this year with.

Solid performance in the third quarter I don't think Theres any underlying message, we're trying to stay around a deceleration of the business. So I think our expectation is we'll continue to see.

<unk> top line traction going into the third quarter into the fourth quarter if anything.

It might look a little more modest just given some of the performance in the third quarter.

Okay. Okay got it and then so I guess, if youre seeing revenues flat maybe slightly up then.

You talked about a few of these inflation and other cost pressures.

It sounds like they're not necessarily supposed to get worse from <unk> to <unk>, but since the red revenue growth isn't huge can you talk about what would be driving the 50 bps.

Margin expansion from <unk>.

Is there anything like rolling off there sequentially or.

There's no there's no real items in Q3 in terms of comparability.

As you as you imply we're obviously based on our.

Implied ranges, we are anticipating a modest EBITDA margin expansion from Q3 to Q4 and I think it just really comes back to the fact that liquid with some additional revenue and given our focus on productivity and cost containment.

Again, I don't think that we are expecting the inflationary pressures to subside.

I would I would.

I would correlate that to our focus on just continuing to drive productivity and profitability going into the fourth quarter.

Okay. Thank you so much.

Thanks, Karen.

Amen.

And our next question will come from Joanna <unk> of Bank of America. Your line is now open.

Joanna Your line is hi, good morning.

Okay.

It has.

A little bit of a pause.

Yes.

Okay great.

Thanks for taking the questions. So I guess.

A couple of items here an outstanding so just curious I guess following up on the commentary around.

Staffing and labor.

So I don't see any improvement there I mean, it sounds like you're talking about.

Lumping everything together I think Michael inflationary pressures.

A bit higher than what you were expecting before but can we talk about labor in particular.

Any easing or anything.

Acceleration in difficulties there.

And I guess in particular.

Problems in getting that in place to take the patients because so far we have not.

And that so I just wanted to hear your commentary on that thank you.

Yes, Joanna it's John .

Look.

It's a tough market out there.

For labor across all of the different.

Job categories that we have as part of our team I would say that.

The pressures remain there I think the team has done a really good job in recruiting.

We continue to see really strong.

And in our recruiting efforts.

Through that process the areas that are a little bit more constrained is certainly in the nursing and the pharmacy technician.

We've got a lot of work underway to make certain that time to fill is in an adequate range as we go through that.

To your question look we like the model that we operate especially in the nursing that gives us some flexibility.

With our full time part time and per diem structure and utilizing our nursing network.

The infinity and <unk> acquisitions that we did so.

We're able to flex really well to meet the demand in the marketplace.

Given some of the market disruption there were some near term challenges that we found just because look we don't run heavy as an organization, we operate pretty efficiently around our staffing models and making certain that we're matching capacity to where demand was when there was.

Some markets.

<unk>.

The ability for us to.

Ramp up takes a bit of time, especially in the operations perspective, when you bring in people and you've got to onboard them train them to your policies and procedures and make certain that they are certified.

It could be able to operate within our environment. So there's a little bit of lag there and so I think the team has done a fantastic job of responding to that.

I don't see anything that is over the midterm.

Overall concern other than just look their wages and labor pressures, we think are going to be persistent.

And we're doing everything we can to focus around making certain that we have the right team members in place, but also focused around productivity and efficiency of the resources that we have.

Great. Thank you and I guess.

A follow up you also mentioned.

Thank you for your payers slate, so any way to kind of frame for us.

Any exploration.

And your pricing going forward.

Yes look I would characterize it is.

And I think we've said this before no one is knocking on our doors, saying, Hey, we want to give you more money.

A reimbursement standpoint, but our market access team has very strong relationships with our payer community across.

The 800 payer relationships, we have the <unk> thousand 500 contracts that we manage.

There have been circumstances, where we have been able to modernize some of the REIT for nursing and per diem.

Given.

The pressures that we're feeling in making certain that we can provide access to their members and us.

Being able to be reimbursed on a fair and and.

And equitable way for the value that we're delivering so it's a focus of the organization I don't want to say that it's it's something that's carte Blanche and that we have an ability to just take that price to them or take price to the market on that.

But we have been having constructive conversations we have been working in partnership.

In different areas and there is an opportunity I think that folks are starting to realize that in order to afford high quality care there are increase.

Increasing cost and theirs.

A little bit more willingness.

Sure.

At least have those conversations and.

And help us modernize some of the rates that.

We need to.

To be able to continue to support their members with that I think we've explained multiple times look.

We get reimbursed across three dimensions.

The drug a clinical per Dms, and a nursing rate and we look at those all in conjunction with each other they're balanced.

And the way that we underwrite the business and so we always try to take a very.

Practical and pragmatic approach looking at the overall economics of those contracts.

And finding the situations, where we need to take rate and we will have those conversations in a very formal and a disciplined way.

And just like a quick close it off with all staffing and pricing.

And you are not providing guidance for next year.

At this point, but any other considerations, we should be thinking about.

As we think about the next year when it comes from headwinds and Taylor.

Yes look Joanne as you mentioned, we're just not in a position to share any thoughts, we'll obviously do that in late February when we come back with the fourth quarter call. We're obviously assessing quite a few <unk>.

Variable going into next year. So it is not in a position to unpack anything at this point.

Okay, I understand and I guess Geoff Cook.

One.

And last one I guess in terms of debt.

Walgreens.

I don't know whether you can share any any any view.

<unk> provided and kind of how are you.

They're there.

The company going forward. Thank you.

Yes, Joanna look as you can imagine we're not in a position thats their stake I'd refer you to.

John and the team over there.

Obviously, we are not in a position.

To share anything regarding their intentions on their remaining stake.

Thank you.

One moment.

And our next question will come from Jamie Paris of Goldman Sachs. Jamie Your line is open.

Hey, good morning, guys.

I wanted to follow up.

First on the acute side I think some of the <unk>.

Facility closings in operation closings were pretty late in the quarter.

There is a wind down period is there any comment on whether you saw the impact of share gains in acute.

The quarter.

Just any timing.

Comments, there or if the share gains might still be ahead of us.

Yes, Jamie good morning, it's Mike.

I would caution to directly link the mid single digits solely to repositioning by others again as I mentioned every market is is quite dynamic we see repositioning every quarter, we see folks entering and consolidating we see some folks as we've seen around midyear where.

Dave.

Down some of the pharmacies and so again.

No market, where we.

We're we're disproportionately benefiting because of our position because there's multiple providers in every single market that we operate and so look we saw a number of moves throughout the quarter. We saw some some folks making moves.

As early as the late second quarter, and again not to not to try to be a little bit elusive, but really our focus is just on being.

Reliable and collaborative with the health systems, whether it's new patients coming on service or transitioning patients where they received notice that our providers know longer willing enable to to support them. So.

I wouldn't link it directly just to a couple of moves from other participants or try.

Try to map it out in one month or another.

Okay. Thank you.

We've just utilization across health care, a little bit subdued in the third quarter, some are calling out vacation or.

Various challenges across health care.

Can you comment on the seasonality you saw for chronic new patient referrals. If it was in line with historical chapter any more seasonality that you might have seen this year.

Yeah, Jamie it's John .

Look.

As you see the tea leaves as we do look I'll start with the acute hospital.

Admissions and utilization was lower I do think again that kind of speaks a little bit to your last question around our team really focusing around reach and frequency and making certain that we are a partner of choice to be able to capture the demand that is in the marketplace on that end.

So I think it was subdued as you said I'd say from the chronic standpoint.

Say similar trends we saw.

No.

I guess, new patients, let's call it naive patient.

Coming on service with us probably in alignment with our expectations, but I would say, it's a little bit lower.

Then where the historical trends had been on that.

I think everyone's trying to understand.

Whats going on kind of a cross utilization across the board.

From the payers to the providers through that process.

But.

I think we will see the trend just continue as is we're not seeing.

Significant changes in either direction around the.

The quantity of patients that we're seeing through the referral process.

Okay, Great and then last quick one.

Can you size the lora within the portfolio and it has lots of exclusivity coming next year for that asset.

Just any any color on.

On side and how to think about impact probably not too much in 'twenty, three but potentially in 'twenty four.

Yes, Jamie it's Mike as you know, we don't we don't breakout specific therapies. What we have said is that our largest therapy.

<unk> therapy category, which is immune globulin is around 20% of our revenue chronic inflammatory therapies is meaningful but it's not even that big and so look when you unpack that further it's across a number of indications and a number of therapies, including things like Remicade and <unk>.

<unk> and <unk>.

So.

I would say as we've as we've as we've talked about we pride ourselves on on that.

<unk> broad portfolio of therapies, we have a great relationship.

With Janssen first Aurora.

But I wouldn't I wouldn't characterize it as a disproportionate.

The risk to our revenue going forward.

Okay. Thanks, I appreciate all the color.

Thanks, Jamie.

And one moment.

And our next question will come from Michael <unk> of.

Of Barrington Research your line is open.

Good morning.

I guess a couple of questions real quick.

Some forecasters are saying heavy heavy flu winter possible COVID-19 spikes, possibly I am just wondering Mike Mike My instinct is that that probably cuts for you guys in a positive way.

Even even COVID-19 with potential site of care shifts I mean can you just comment if we do see heavy flu or reemergence of Covid.

Colgate, our COVID-19 spikes in parts of the country. How you guys think that cuts for you. Thanks.

Yes, I think the.

The ability for us to service patients in the home or in a dedicated infusion suites.

Certainly.

Had some benefits for those that are immunocompromised and don't want to be in a community setting to receive their care given.

Influenza or other contagious diseases on that so look I think we're well positioned with what we've done both in expansion of our dedicated infusion suites as well as our ability to reach into the home and so we think there are some positive aspects of that.

Again, we feel today, we felt.

Through some of the changes in the health care delivery system with the impacts of Covid threw that standpoint hard to quantify but I would just say.

We normally see that that is something that.

Support.

Here in the home or in an isolated setting as opposed to a community setting.

Got you, thanks, and just one other.

No.

Federal government.

There have been stories out there expanding the standard tax deduction, social security benefits due to inflation and you guys have talked about some positive conversations and renegotiations with commercial payers I'm. Just wondering is there any chance that this persistent inflation.

Possibly could result, either in the near term or longer term and maybe a more rational reimbursement structure from.

On the federal side Federal government side. Thanks.

Yes.

Unfortunately, it's kind of a.

Comment.

Answer that I give quarter by quarter.

Look we're doing everything we can to be working on both independently and with the National home Infusion Association to get Congress to act around the preserving patient access to home infusion.

There's a lot of work that is happening behind the themes with.

Bipartisan support to get that legislative fix.

Theres just a lot of priorities in Washington, right now.

And I think Theres, a lot of wait and see around what happens with the mid term. So look we're always going to continue to.

Singing the praises of home infusion from the highest mountain top and try to get as many people to understand the disadvantage that exists right now per Medicare beneficiary, given the current reimbursement structure, but it's really hard to hazard a guess spin one would hope that common sense will prevail, but it's what.

Kington and Theres, just a lot of different.

Things that are pulling on.

The priority from that perspective.

Just a quick follow up so you don't you don't feel like this.

Sort of persistent inflation in any way to sort of move the needle any closer to.

Some kind of rational reimbursement policies that I mean is that fair.

I think Thats fair I mean, I think the merits of what we've been trying to do or the merits of what we've been trying to do I don't think that the inflationary conversation does does really anything.

Support that there has to be a recognition of the deficit of access.

And the fact that total cost of care would be reduced for Medicare beneficiaries, if they utilize home or alternate site infusion therapy as opposed to.

Where those patients are receiving care today. So inflation is certainly an aspect of that but there's just a fundamental.

Misunderstanding.

Within CMS around the value and virtues of the home is being a place of care for infusion services.

Okay. Thank you so much.

Yes Youre welcome.

And I am showing no further questions I would now like to turn the conference to John Rademacher for closing remarks.

Yes. Thank you for attending our third quarter call. This morning and for your interest in optical health as you heard we had a very productive third quarter and we are confident in our strategy, we are executing and the strength of the platform and our team.

Her and be well.

This concludes today's conference. Thank you for participating you may now disconnect.

Okay.

The conference will begin shortly to raise Johan during Q&A you can dial one one.

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