Q1 2023 Evolent Health Inc Earnings Call
Speaker 1: The that.
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Speaker 1: So.
Speaker 3: Their host for the call today from Ebblin, TELD, are set blackly, Chief Executive Officer, and John Johnson, Chief Financial Officer. This call will be archived and available later this evening for the next week via the webcast on the company's website and the section entitled Investor Relations.
Speaker 4: I will now have the call over to Seth Frank, Avalent Vice President of Investor Relations. Thank you and good evening. This conference call will contain forward-looking statements under the U.S. federal laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. The description of some of the risks and uncertainties can be found in the company's reports. That are filed with the Securities and Exchange Commission.
Speaker 4: and the form 8K filed by the company with the SEC earlier today. During management's presentation and discussion, we'll reference certain gap and non-gap figures and metrics that can be found in our earnings release as well as a summary presentation available on the event section of Evalence IR website. And now I will turn the call over to Evalence CEO Seth Blackley. Good evening and thanks for joining us. My compared comments today will focus on updating you on our quarterly results, progress on our three operating priorities and the status of integrating our recent acquisitions.
Speaker 4: As you know, we're hosting an investor meeting in our into Virginia with a live webcast option as well on May 23rd and I'll preview that event at the end of this call. John will discuss the quarterly results in more detail and our update on guidance for the year and we'll look forward to you taking your questions at the end as always.
Speaker 4: priorities of strong organic growth, expanding margins, and optimal capital allocation.
Speaker 4: Second, we announced the significant oncology specialty, technology, and services expansion with Centine and March. To recap that announcement, Centine will expand its use of Evolent Health oncology solution across its Centine and Wellcare Medicare Advantage members nationally. This agreement expands and deepens the specialty care partnership between Centine and Evolent beyond Medicaid and into the rapidly expanding MA market. We began to go live in local markets during April , adding over 800,000 MA members in 26 states by the end of 2023.
Speaker 4: PMPM fees for this agreement are above reported corporate averages for the company's technology and services solution, as this is an MA book of business. This is also another excellent example of how we grow within our client base by increasing geographic and specialty reach with our proven solution to manage oncology costs and health outcomes.
Speaker 4: It's also worth noting this was a competitive displacement of a smaller point solution. Avalon continues to benefit from the breadth of offering and the trust we've created with our customer by meeting our operational commitments.
Speaker 4: Please note that disagreement with Sintine is in addition to the $20 million of incremental adjusted EBITDA we anticipate from Sintine's expansion of NIA solutions.
Speaker 4: which was built into our fully synergized estimate of $85 million from NIA by the end of 2024.
Speaker 4: These agreements announced today bring our total new partnerships.
Speaker 4: To form your today, compare to our annual goal of 6-8 partnerships and significant expansions.
Speaker 4: Looking ahead, our pipeline of new business remains strong. During March, my team and I hosted a number of current customers and prospective payers. I came away highly encouraged about the power of our integrated platform and the prospects for continuing to drive strong, organic revenue growth in the years ahead. I'm also happy with our progress against our second core operating priority of
Speaker 5: that year.
Speaker 4: Reaching this profitability level will require continued maturation of the performance suite book of business we already have as well as continued sales of our high margin specialty technology and services solution. The announcements today continue to illustrate our progress against specialty technology and services growth and we remain on track with our performance suite margin maturation goals in the latest quarter. We look forward to providing you additional detail on both fronts during our investor day.
Speaker 4: Also, I want to highlight that we previously indicated that Evlant would generate approximately 75% of its adjusted EBITDA dollars in 2023 from Evlant's fee-based products and 25% from our performance suite business. We're seeing the merits of this balanced approach with the strong top and bottom line results in the quarter. While the performance suite will continue to drive our highest growth rates in revenue and deliver more significant EBITDA contributions.
Speaker 4: and our market leadership.
Speaker 4: Our near-term capital allocation priority is to de-leverage the balance sheet through adjusted EBITDA growth and debt reduction through strong cash generation.
Speaker 4: We will also continue to evaluate opportunities to simplify our capital structure to yield lower cost, the service or debt.
Speaker 4: while at the same time protecting common share holders.
Speaker 4: As John will discuss in more detail, strong cash generation in the quarter relative to historical seasonal expectations resulted in our net leverage ratio that is better than our previous expectations, and we remain on track to meet or exceed our target of generating $120 million or more in cash flow.
Speaker 4: this year prior to interest or debt service.
Speaker 4: To close, let me add a couple points on our integration and our agenda for the investor event. Our integration of NIA is on track and progressing well. We have multiple work streams underway that are focused on the collective teams across both legacy and new members of our family from NIA.
Speaker 4: We finalized and implemented the integrated organizational design over the last few months and are beginning to see the cost, capability, and sales benefits of the combined company.
Speaker 4: During our investor day, we will talk more about the power of the integrated product platform, the operating model that's emerging as well as the future of cross-zone opportunities and their impact on our margins.
Speaker 4: For our May 23rd event, we have three primary goals. The first is to give you all a detailed understanding of the problems our clients face and how we solve them with our platform. You should walk away with a clear understanding of what everyone does and how we accomplish our work.
Speaker 4: Second, you'll get exposure to a broad cross-section of our deep bench of executive talent, as well as several video interviews with key clients. And third, John will provide insight into Evelyn's financial model, including a deep dive on our unit economics and margin maturation opportunities. We hope you can join us in person or through the webcast.
Speaker 4: The link will be live on our IR website soon. If you want to attend in person and have not yet received the registration link, please reach out to Seth Frank. With that, I'll turn it over to John .
Speaker 6: Thanks, Seth. We are looking forward to seeing many of you in Arlington here in a few weeks. Before we get into our detailed results for Q1, I'd like to highlight a couple of disclosure updates we're making as we integrate NIA and move towards one Evelyn. These were previewed on our February call and now we have numbers to talk about, so let's review those.
Speaker 6: First, as discussed, we are now reporting our financial results in one reportable segment as we focus future growth on our specialty value-based care business and integrate the entire organization around this specialty-led strategy.
Speaker 6: To provide insight into the growth drivers of our business, we are continuing to disclose product membership and PMPM fees for our three core product types, which we'll describe going forward as Performance Suite, Specialty Technology and Services Suite, and Administrative Services.
Speaker 6: We are also maintaining the metrics for cases and revenue per case we established last year for the parts of our business where revenue is not PMPM driven.
Speaker 6: Since our clients can have multiple solutions deployed over the same membership, for example, cardiology, oncology, musculoskeletal, advanced imaging, and so on, we are also introducing a metric of estimated unique members to accompany our existing metrics on members by product.
Speaker 6: Let me give you a real life example here.
Speaker 6: A Medicaid plan on the East Coast has approximately 250,000 members and three Evalent Product Deployed, administrative services, and specialty technology and services for muscular skeletal and advanced imaging.
Speaker 6: This plan will account for 5,000 specialty and technology services product members and 250,000 administrative services product members for a total of 750,000 product members.
Speaker 6: Under our new disclosure, this plan would contribute 250,000 to our unique member count.
Speaker 6: In total, we had an estimated 41.3 million unique members during the first quarter of 2023, with a total of 65.6 million product members for an average of 1.6 products per unique member.
Speaker 6: Given that we have six separate categories of PMPM-based products that we can provide any one member, excluding our case rate products, we believe these metrics together provide visibility into a key element of our strategy, our ability to grow within our clients and cross-sell additional solutions.
Speaker 6: further penetrating their specialty spend categories.
Speaker 6: Finally, to simplify your modeling efforts, we are now providing average monthly membership and corresponding PMPM fees versus period ending membership. Average membership is the primary driver of revenue for the quarter.
Speaker 6: We have provided a table showing each of these metrics, quarterly back through 2022, in the earnings presentation posted to our website.
Speaker 6: Now, let's talk about the first quarter. A key theme is our performance suite partnerships, which continue to progress as expected and drove both our top and bottom line results in the quarter.
Speaker 6: You'll see in our 10Q a reduction of about $20 million in claims costs related to 2022 and prior, which falls into three categories.
Speaker 6: First, about 9 million of the 20 million is related to reductions in revenue with minimal impact to adjusted EVA.
Speaker 6: This symmetric reduction can happen in Medicaid in particular when both we and our partners are performing quite well relative to minimum medical expense floors.
Speaker 6: Without this one-time deduct to revenue from prior periods, our top line for the quarter would have been approximately $437 million.
Speaker 6: The remaining lower claims expense flowed through to our bottom line in the quarter and was consistent with our expectations for the year. As we discussed on our call in February , we will typically see a pickup in margins in the first three to five quarters of a performance suite go live when we have the data to switch our accruals from an initial budget to a full budget.
Speaker 6: to being based on actual claims experience.
Speaker 6: And we saw a $7 million pickup in the quarter from such dynamics. Finally, during Q1, we also received final performance data driving the release of about 4 million in margin that was originally anticipated for Q2 and Q3.
Speaker 6: This accelerated recognition of adjusted EVITA from future quarters in 2023 was the main driver of results slightly exceeding our first quarter guidance range. Overall, we are pleased with the progress in our performance suite. These sorts of quarter-to-quarter dynamics are factored in to how we forecast and guide on the business.
Speaker 6: as our performance sweep margins continue to mature at the pace we expect. I also want to highlight continued progress in our cash flow and balance sheet.
Speaker 6: As you know, we are highly focused on cash generation and delevering. We ended the quarter with net debt of $523.4 million, or 3.9 times our reported trailing 12-month adjusted EVITA.
Speaker 6: Adding to our Trailing Club Month adjusted EBITDA, the full years worth of the acquired adjusted EBITDA from IPG and NIA, an additional 47.9 million, results in a ratio of 2.9 times, already lower than our initial target for the end of 2023.
Speaker 6: and largely driven by cash generation in the quarter after the NIA transaction. In addition, after the quarter closed, our available cash increased by an incremental $20 million from the Passport Wind Down.
Speaker 6: We expect to repatriate up to an additional 10 million of cash later in this year as we complete the shutdown process for that plan. We remain committed to using excess cash to pay down our debt and we repaid 37.5 million on our revolving facility during Q1 of 23.
Speaker 6: Now, let's review the numbers before turning to guidance. Revenue in the quarter was $427.7 million, an increase of 44% versus the same period in the prior year. Excluding the addition of $48.5 million in revenue from NIA in the quarter, the NIA's
Speaker 6: Growth was about 28%. Let's break down membership and PMPMs for the quarter. We averaged 3.2 million product members on the performance suite during Q1, compared to 1.5 million in Q1 of 2022.
Speaker 6: with an average PMPM fee of $24.66 versus $38.19 a year ago and in line with our average fees in Q4. As a reminder, the year-over-year change in average PMPM is a result of higher growth in Medicaid and commercial lines of business, which run lower than our corporate average.
Product membership in our specialty technology and services suite was 60.5 million members during the first quarter compared to 14.3 million in the same period last year. Average PMPM fees were 36 cents.
for the first quarter of 23 versus 32 cents in the first quarter of 22, with the growth and membership principally driven by the addition of NIA. Product members on administrative services, formerly Evelyn Health Services, were 1.9 million compared to 2.1 million in the same period of the prior year.
with an average PMPM fee of $14.91 versus $17.34 in the first quarter of 2022. Total quarterly cases associated with advanced care planning and surgical management totaled $15,433 for the first quarter, and average revenue per case totaled approximately $15,000.
$2,555 for the first quarter, both in line with expectations.
Our adjusted evidov result was 50.5 million versus 24.3 million in the first quarter of 22, reflecting organic growth, maturation of our performance suite contracts, and the addition of IPG and NIA.
Adjusted EBITDA margin of 11.8% represented expansion of 360 basis points over the same quarter last year with the same drivers.
As a result of the close of the NIA transaction, we made two non-cash entries related to our tax assets and liabilities, releasing the majority of our remaining valuation allowance against our deferred tax assets and accruing the remaining liability under the tax receivable agreement we have with our pre-IPO investors for a net benefit in the quarter of about $2 million. With our historical net operating losses and at current course and speed, we have been
We do not expect to have meaningful federal cash tax expenses until 2025 at the earliest.
Turning to the balance sheet, we finished the quarter with 157.5 million in cash and cash equivalents, including 32 million in cash held in regulated accounts related to the wind-down of PATHFORD.
Excluding the cash held for passport, we had $126 million of available cash, a decrease of $26 million versus the end of the fourth quarter, and slightly ahead of where we'd expect to be with normal working capital seasonality.
cash deployed for capitalized software development in the quarter with 8.1 million.
Turning now to our outlook for the year.
Based on strong underlying performance, we are reiterating our full year adjusted EBITDA guidance of $180 to $200 million and modestly raising our revenue guidance for the year to be between $1.935 billion and $1.965 billion, an increase of $10 million at the midpoint.
A couple of reminders on what goes into this outlook. On the top line, we expect to see NITE's quarter-over-quarter expansion across each of the next two quarters as we go live with previously announced performance suite partnerships with Molina and Humana.
Regarding Medicaid redeterminations, we have no meaningful incremental data since the last time we spoke, and we have not changed our assumptions.
Three key reminders on those assumptions.
First, most of our Medicaid revenue is derived from states like Illinois that we expect will start re-determinations later in the year.
Second, we expect the gross impact on our Medicaid membership to be between 8 and 10 percent by the end of the year, representing a couple points of net revenue headwind this year given that Medicaid represents about 40 percent of our revenue. And finally, we have incorporated into our bottom line guidance an assumption that those members who come off of the Medicaid rolls
are healthier than those who stay on, representing a modest negative adjusted EBITDA impact as well. We believe our profitability assumptions are conservative here, given that we typically have contractual rights to adjust up our PMPMs if we do in fact lose healthier members.
Given the timing benefit to adjusted EBITDA in Q1 that I referenced earlier, we have revised our expectations for adjusted EBITDA sequencing across the quarters. We now expect Q3 2023 to be the low quarter of adjusted EBITDA, stepping back up in the next quarter to exit 2023 with a strong Q4. Accordingly, for Q2, we are expecting revenues of between $2.5 million and $2.5 million.
followed by the number one on your touchstone phone. You will hear a one tone prompt acknowledging your request.
Your first question comes from the line of Sandy Draper from Guggenheim Partners.
Your first question comes from the line of Sandy Draper from Guggenheim Partners. Your line is now open.
Great, thanks very much. I guess the first question, John , I just want to make sure I understand the, I think you said it was about a $10 million reduction in revenue. That was from a prior period adjustment, and so with nothing that happened this quarter, I just want to think of maybe just walk through those dynamics, and then I guess the unrelated follow-up.
I appreciate no new information on Medicaid redetermination, but just thinking about some of the commentary out of the payers around 24 that some of the, they're expecting maybe a headwind to cost. Is that something that would have an impact on you guys or as you just said, maybe that's already factored in numbers? Thanks very much.
Hey, Sandy, good questions. On the revenue side, it was related to 2022. And this sort of thing can happen when, in particular, as I mentioned, in Medicaid plans.
When you have very strong performance, when you release a hold on claims, claims come in better than expected. If a plan is performing very well, then the plan has a minimum MLR floor. And when we do well and the plan does well, it can result in an element like this.
I would say generally speaking, more broadly on this topic.
We tend to have very good insight into how these sorts of dynamics will play out over the full course of the year.
The timing, though, of something like this is not at our discretion and is based on when we receive the final data from our partner health plans. And so we had expected something like this, not a surprise, and incorporated into our full-year guide.
the specific timing is harder to predict.
Moving to redeterminations to hit on that point. So, yeah, no new information that is significant. I think we'll have more information into the second quarter into the third quarter as our major Medicaid states really get into that gap there.
processes. Generally speaking, as we think of the bottom line impact on potential risk pools of the redetermination process, I would say two things, and our perspective has not changed. The first and the most important...
is that the way our pricing tends to work is if there is, for example, a change in cancer prevalence in a population, then we have the ability to work with our partners to update our fees accordingly.
Secondly, as I mentioned in the prepared remarks, we have incorporated an estimate in the spirit of conservatism of a potential impact of the risk pool shifting a little bit. So that's how we're thinking about it. I feel pretty good about where we are and we'll continue to keep you updated as we see. We'll continue to keep you updated as we see.
move forward. Great. Thanks, John .
Your next question comes from the line of Charles Ray from DD College. Your line is now open.
pricing if there's changes in the population. Is that over?
Like how periodic are you able to to make those changes and I guess particularly as it when we think about Going you know with oncology with Humana into into Florida, Arizona, you know, obviously you start to get too much bigger populations here Maybe talk a little bit about sort of the the underwriting process. Did you guys go through as you think about that and
And then as I said earlier, how often are you able to review that? Yeah, it's a great question, Charles. You know, I think the most important component of this answer is that it's an ongoing dialogue with our partners. Where are we performing? How are we delivering value for them, both on the pure cost side and also on network performance and quality? As we think about the speed of potentially updating the fee schedule, I think the real answer to it is that it's a real discussion.
bracket it is it's not real time and it's much faster than a health plan state cap rates and so the key from our perspective
is to be hyper focused on performing for our customers and in regular dialogue with them on what's going on in the market and what are we seeing so that we can best align with them going into the future.
Okay, maybe just to follow up, the 4 million in EBITDA that you discussed being pulled forward from the second and third quarters.
Can you talk about what were the triggers that kind of released that earlier than you would have expected? And is there any additional margin that's sort of tied up in the potential performance fees that's –
perhaps not in the current guidance that could be that you might see later. So the way that this sort of thing tends to work, and as I mentioned my earlier answer to Sandy, is highly dependent on when we get started to accept these conditions before the close finish of Ohi this is going to be a
data, and mostly what that looks like is when we get claims completion. And in this particular case,
the data came in a little earlier than we expected it to.
The actuarial standard, as you probably know, is to retain a margin for adverse developments until you see that final claims completion. And that's the standard that we follow. And we'll continue to follow over the course of the coming quarters and years.
the actuarial standards, as you probably know, is to retain a margin for adverse developments until you see that final claims completion. And that's the standard that we follow. And we'll continue to follow over the course of the coming quarters and years. Okay, great. Thank you.
Your next question comes from the line of Ann Samuel from JP Morgan. Your line is now open. Your line is now open.
Hi, guys. Thanks for taking the question. You spoke about margin progression for performance to be contracts being beneficial in the quarter. I was wondering, how much does that vary by payer in terms of the maturity curve, or is it relatively consistent?
Hey guys, thanks for taking the question. You know, you spoke about margin progression for performance speed contracts being beneficial in the quarter. I was wondering, you know, how much is that vary by payer in terms of the maturity curve? Or is it unilaterally consistent? That's a good question, Annie.
You know, I think if you were to look at the
beginning to end, we typically think of it as a 36 month curve, right? If you look at the beginning to end, it looks pretty consistent. And on a quarter to quarter basis, it can be pretty different from customer to customer. And part of that, it can be driven just like what we're just talking about the availability of data.
in a number of different lines of business.
and preserve both the ability to drive that margin maturation and to serve our customers and the ultimate consumer here being the member.
That's really helpful. Thank you. And then just one more. It's kind of a housekeeping question. In your deck, you called out a wind down of legacy clients in administrative services. I was just hoping maybe you could explain what that is.
Your next question comes from the line of Ryan Daniels from William Blair. Your line is now open.
Thanks for taking the questions. My first, Seth, I wanted to get a little bit more detail from you on the payer slash and search announcement you made tonight.
Can you just explain that a little bit more? I guess I'm curious if it's for all of AmSurgis ASE cases that use implants, number one. And then number two, is it just for ortho or does that spill into the opto space? As I know, ophthalmology and GI are kind of their two biggest areas of focus.
Yeah.
Hey Ryan, so I think the way to think about this this relationship is we we IPG Which we now refer to as our surgical solution Had a relationship with an existing national payer the national payer I think it's happy with the work we're doing on their behalf in a small number of states and is expanding
their relationship into some different ASE arrangements and want us to be involved in that to help them manage cost and trend. And so that then pulls us through into a number of new states that we weren't in to begin with, Ryan. Drives obviously additional revenue and EBITDA for us, but I think the fact that.
It's surgical activity with implantable devices could be across a number of different specialties.
And if I'm a doctor, one of the doctors working at an Amsearch center, is it going to be for all my cases that I would leverage the IPG solutions or is it just for cases that are with that specific payer.
In this case, it's with that payer. Now, of course, it gives us an opportunity to do more and have a broader growth opportunity in those markets, as I mentioned earlier.
or manage Medicaid companies to look for solutions like yours to help them control NLR in a period where membership could be reduced and the remaining members could be higher cost. Is that a potential growth stimulant for the business? Thanks.
Brian , I do think that anything that creates pressure on the payer community, this being an example, are generally good for us in terms of creating a sales dynamic that's helpful. I think the risk adjustment efforts that have been going on in the Medicare Advantage side fall into some more category.
Again, anything that puts pressure. And so I think the answer to that is yes. And I think more broadly, one of the things that looked in this up a little bit in the conversation today that has been useful is I think it's payers look at the next horizon of quality and cost management that's been a lot with primary care.
There's a lot left on the specialty side, and so we feel like we're still in early innings, and as pressure comes, that is helpful to us.
specialty side and so we feel like we're still in early innings and you know as pressure comes that is helpful to us. Okay perfect, thank you so much.
Thanks, Ron. Your next question comes from the line of Jeff Garrow from Steffens. Your line is now open. Yeah, good afternoon. Thanks for taking the questions. I want to ask a couple on the NIA integration.
So the first would just be any color you could provide on the adjusted EBITDA contribution in the quarter if it's performing kind of in line with the annual expectation she had said earlier. Hey Jeff, it sure is right in line, you know only ten weeks in the quarter we had NIA, but I feel good about it.
Yeah, and Jeff, it's that I would say more broadly just in terms of the integration. You know, we mentioned it in the remarks earlier, but we feel like we're on track.
A lot of things going quite well. We're very happy with where we are, having finished the organizational part of the integration, and now really focusing on the platform side, and the cross selling, and all the things that come after that. So we feel quite good about where we sit right now. Yeah, that's great. Maybe to follow up a little bit on that cross-sell opportunity.
Yeah, look, I think the things that were in the pipeline prior are proceeding as expected. When you think about cross-sell, Jeff, I think as we have talked about with IPG or VITA or anything else in the past, six to nine months in is when you really start to bear fruit. We bought IPG last summer. First quarter I think was consistent with when we thought we would start seeing some opportunities like the one we announced today, and I think it would be similar in this situation with NIA. The one thing that's new and different is that we now, because of the breadth of what we have with all the assets pulled together, we're seeing a lot of opportunities in the
have the ability to talk about a really broad and deep platform that I think is quite differentiated. As I mentioned in the comments, we had a bunch of customers and prospective customers in a room two long ago and I think the attachment to the platform and where we're headed with it is excellent. I'll say excellent. It's exciting. I think a lot of...
positive feedback on where we're headed and gives us a lot of confidence to keep running the direction we're going. Great, thanks for taking the questions. Your next question comes from the line of Jessica Dawson from Piper Sandler. Your line is now open.
The next thing I would mention is that very, very rarely do we actually get involved or our payer in denial. We're doing a lot more what I would think of as B2B. Second opinion work, right? Meaning we're actually providing valuable input to that position and that, as you mentioned, as comes in the form appear to appear.
with new century for I think that was an oncology example. And so that gives us a lot of confidence that the way we're doing it is creating value but doing it in a way that has less friction just. And over time, we're gonna hopefully improve on that, not just the 84%, but on.
this idea of further automating things. And I think AI could be part of that over time, as could our ability to continue to do things with incentives that turn into more of a shared decision-making model with the physician and the patient, rather than us having to do the intervention. So a lot of innovation.
in 23 or what the contribution was in 1Q and then just whether or to what extent that relationship was factored into the 2024 adjusted EBITDA run rate side. And that's it for me. Thank you. Yeah, I'll take that one. Hi, Jess. I believe we said that we expected between 30 and 40 million of revenue this year from Bright. No change there.
and we do not expect revenue next year.
I'll add it. Thanks again. Here next question comes from the line of Sean Dodge from RBC Capital Markets. Your line is now open.
Yep, thanks. Maybe just going back to the answers deal, with the payer involvement there, I guess the way Evelink gets paid, should we think about this being like a tech and services kind of arrangement or is there some shared savings element to it too? And then any kind of data points you can give us to help triangulate in on.
you know, expected revenue and EBITDA contributions from it, you know, either this year or next. Yep. So, you know, revenue model is IPGs paid per case. It's a fee-for-service model that enables value-based care and has extremely predictable margins, something from the CFO chair that I quite like.
On size, it's not huge on the top line, but a nice contributor on the bottom line, given the strong margins. Okay, great. And then, I guess you could just give us a little bit of insight into the dynamics behind why Q3 is now expected to be the low point.
with the acceleration of that 4 million into this quarter, we now have a better sense of how that's gonna lay out across the year.
the acceleration of that four million into this quarter, we now have a better sense of how that's gonna lay out across the year. Okay, all right, thank you again.
Your next question comes from the line of Jhayalendra Singh from Truist. Your line is now open.
Thank you and thanks for taking my question. I want to go back to Sandy's question around this 9 million revenue reduction. John , you said it's related to minimum MLR rebate. I'm still a little confused at why Evelent is on hook for that. Is there some unique arrangement with this particular pair or is this arrangement across all your pair contrasts?
Dynamics not put a cap on your profitability because if trends are better, you should realize that as your profit. And I'm just curious like clarify like why this did not impact your EBITDA and the quarter.
cap on your profitability because if trends are better, you should realize that as your profit. And just curious, clarify why this did not impact your EBITDA quarter. Yeah.
mentioned earlier this is typically only relevant when we have a mature Medicaid client that's already operating at or better than our target margins.
where that client itself is also doing very well. And you can imagine the look, right, if we're driving outsized margins in a world where a Medicaid client is having to ship money back. And so in the spirit of partnership,
the way that we seek to align with our partners is consistent with their own regulations. So as claims complete and you're able to remove holds in your IVNR based on the final claims completion.
then that can sometimes result in symmetric revenue reduction. That's what happened in this quarter. Okay, that's helpful. And then also like on the second half to first half, like first half is kind of a ramp up this revenue. You talked about Ximena and Manina contract.
I know you talked about EBITDA cadence, but fair to say that to the ramp you expect in the second half, that's all Humana and Molina contract and partially offset by redeterminations. And in general, if you could just provide some color on Humana arrangement expected to begin in the second half, what's the progress there? Which quarter should we start seeing the revenue coming from that contract? Yeah. I said taking those in reverse order.
Humana implementation on track to live in Q3. Feeling good there. And the rest of the sort of revenue shaping across the year is as I mentioned in the remarks, we'll see a nice step up in Q2 and then another nice step up in Q3. Thanks a lot.
Your next question comes from the line of return close from Kanakor Junyawiti. Your line is now open. Yeah, thanks for the questions. A little surprised with respect to the Centene in WellCare beginning to go live here in April . Your next question comes from the line of return close from Kanakor Junyawiti. Your line is now open. Your line is now open.
Can you just talk a little bit more about that rollout and the above corporate average tech and services PMPM in terms of what the magnitude MA is versus like Medicaid? Yep.
Richard, Seth, I think, good question. Look, I think it's a positive and that it speaks to the depth of the partnership that we have with our partner at Centene, and I think we're doing a nice job for them meeting our commitments. And, you know, as we've said, I think for many, many quarters in a row when we do that.
we generally get the right to either go faster, add things, and this is a great example of that, right? And so I love seeing it. It's consistent with what we thought we would see, and it's a part of our plan to the 300 million, you know, of IVIDA, Richard, that we're driving towards. So I think it's a nice piece. As we've talked about in the past, tech and services has...
a nice margin profile. And so while this kind of relationship might not be huge on the top line approaching, you know.
between $5 and $10 million say at run rate, Richard, it certainly would have a really nice flow through on the bottom line. And so, you know, we think about that bridge to the 300 million having a nice set of arrangements like this that contribute nice EBITDA.
and are very consistent along with the performance sweep margin maturation. I think the biggest thing I want people to take away from the call today is that both of those are progressing as we hoped. Okay, and with respect to someone that's doing tech and services, what
historically has been maybe the timeline in terms of adopting the tech and services and then potentially transition into the performance suite. Is there any rule of thumb that you've experienced over the last, call it four years?
four or five years since you've had NCH? Yeah, it's a good question, Richard. I don't think there is a rule of thumb on that one. We've had a couple that have switched over from tech services to performance suite. They've happened on slightly different timelines. It depends, I think, largely on what is the issue that our customer is trying to solve and we can guarantee more savings with the performance suite, right? A lot of it is true for a user. A lot of it is true specifically from everybody who partners with our customer solutions. Image is making a difference in the world of these two They are not iron it started already, so Because of the development progress, They are dealing with new partnerships With And Another reason to say that is because it's something they believe in
Per the earlier question, the more pressure there is, the more likely we have opportunities, I think. We've also had a bunch of performance suites go straight to performance suite, you know, and skip the whole tech services kind of stop. And I think you're going to continue to see some of both. For all the reasons I just said, and I don't think there's an easy rule of thumb on it.
the earlier question, the more pressure there is, the more likely we have opportunities, I think. We've also had a bunch of performance suites go straight to performance suite, you know, and skip the whole tech services kind of stop. And I think you're gonna continue to see some of both for all the reasons I just said, and I don't think there's an easy rule of thumb on it. Okay, thank you.
Your next question comes from the line of David Larsen from BTIG. Your line is now open. Hi, I think you mentioned that the centine win was in addition to the sort of announced deployments at the time of like this.
transaction and I think I heard there was another $20 million in addition to the post synergy $85 million of EBITDA. Did I hear that correctly? Hey Dave, no, we were just making the point that the MA oncology tech and services deal with not a part of the originally announced.
that went into the $85 million number. There was not an additional $20 million. Okay, thanks. And then in terms of the revenue impact from this Medicaid health plan, I think it was $20 million in the quarter, not $10 or $9, right? It was $20 million? I think it was $20 million in the quarter, not $10 or $9, right?
I think I understand.
What I thought to articulate in my prepared remarks was we had in the quarter a reduction of $20 million in total in claims expense related to 2022. About $9 million of that $20 million was associated with the revenue deduct as well.
I thought to articulate in my prepared remarks was we had in the quarter a reduction of $20 million in total in claims expense related to 2022. About 9 million of that 20 was associated with the revenue deduct as well. The other 11 dropped our bottom line.
Yeah, and David, and I think David just the last comment I'd make for the group, but relative to this question is highlighting what John said, which is these are things that we understand. We know they're coming. We forecast for them. They're in guidance. They, you know, we kind of have a sense of when they're going to come up. And I would think of it as normal course things that...
we factor in, which is, you know, why we're continuing to end up inside the guidance ranges. Great. As a reminder, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from the line of Bryant and Killet from Jefferies. Your line is now open.
Brian , you there? All right. That's the easiest question of the night.
Brian , you there? All right, that's the easiest question of the night. Okay.
Okay JP, you can wrap the call in if there's no other additional questions if no one else was pulled in. Thank you. There are no further questions at this time. The addition gentleman, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Okay, JP, you can wrap the call then if there's no other additional questions if no one else has pulled in. Thank you, there are no further questions at this time. The addition gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you.